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2015 (8) TMI 1237 - CESTAT NEW DELHI

2015 (8) TMI 1237 - CESTAT NEW DELHI - 2016 (331) E.L.T. 496 (Tri. - Del.) - Duty demand - Valuation of goods - Related person - deduction of these trade discounts offered to dealer being a group company selling entire production of the assessee - held that:- just because the entire production of goods of the appellant company was being sold to M/s. AIL who were selling the same at a higher price or that M/s. AIL were incurring the expenses or marketing and advertisement of the goods produced by .....

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t company - and two other group companies, M/s. Adonis (India) Limited were interest free loans or at interest much lower than the market rates.

The appellant company and M/s. AIL can be treated as related persons if there is an evidence to prove that the appellant company had all pervasive financial year and managerial control over M/s. AIL and M/s. AIL were just an extension of the appellant company. But in this regard, we do not find any such evidence.

Commissioner was r .....

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s not only totally incorrect order but also a perverse order and, therefore this part of the order has to be set aside.

Apex Court also in the case of CCE Vs. Xerographic Limited reported in [2006 (3) TMI 308 - SUPREME COURT] has held that the distributor companies of an assessee cannot be treated as related persons, as existence of extra commercial consideration for discarding the normal price between the assessee and the distributor companies has not been shown. In our view, the rat .....

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eferred to as Appellant Company) are manufacturers of colour T.V. sets. The period of dispute in the present case is from June, 1994 to August, 1996. During the period till, February, 1994, the rate of duty on colour T.V. sets was specific and during that period, the appellant were selling the colour T.V. sets manufactured by them directly to their dealers. W.e.f. 1/3/1994, the rate of duty on Colour T.V. sets became ad-valorem. With the change in the duty to ad-valorem rate, the appellant chang .....

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Monica, Electronics Limited (hereinafter referred to as MEL) and M/s. Onida Saka Limited (OSL). The department's contention is that the appellant and M/s. AIL are related persons, and therefore, during the period of dispute, i.e., period from June, 1994 to August, 1996, the assessable value of the goods manufactured and cleared by the appellant would be the price at which the same goods were sold by M/s. AIL to their dealers. Besides this, there was another dispute regarding admissibility o .....

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ounts was not admissible. 1.2 The matter was adjudicated by the Commissioner vide order-in-original no. 48/2000 dated 22/12/2000 by which while the Commissioner dropped the duty demand of ₹ 28,35,170/- holding that the deduction of trade discounts extended by M/s. AIL to its dealers is admissible, he confirmed the duty demand of ₹ 35,63,928/- on the ground that the appellant and M/s. AIL are related persons, and therefore, the price charged by M/s. AIL from their dealers would be the .....

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f the Appellant Company. 1.3 In pursuance of the Commissioner's order dated 22/12/2000, the appellant company filed a refund application before the Assistant Commissioner for refund of the amount of ₹ 28,35,170/-. The refund application was, however, rejected. The appellant, thereafter, filed an appeal before the Commissioner (appeals) against the Assistant Commissioner's order and the Commissioner (appeals) vide order-in-appeal no. INT/Ist/669/03 dated 18/12/2003 allowed the appea .....

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he Commissioner's order dated 22/12/2000 confirming the duty demand of ₹ 35,63,928/- against the appellant company along with interest and imposing penalty on them under Section 11AC and Rule 173Q (1), the appellant company filed an appeal before the Tribunal. The Tribunal vide final order no. 181-184/001A dated 4/05/2001 set aside the Commissioner's order and remanded the matter to the Commissioner for fresh adjudication for certain directions. The matter was adjudicated de-novo b .....

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t Commissioner. The Commissioner, however, in this order did not impose penalty under section 11AC but imposed penalty of only ₹ 5 lakh on the appellant company under section 173Q and besides this, imposed penalty under Rule 209A of Central Excise Rules, 1944 of ₹ 2 lakh, ₹ 1 lakh and ₹ 1 lakh on M/s. AIL, Shri Lokesh Khanna and Shri Ashok Chawla respectively. 1.5 Against this order of the Commissioner, these four appeals have been filed by the appellant company (M/s. Ond .....

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2/12/2000 passed by the Commissioner and the matter of refund of this amount is pending before the Assistant Commissioner and the Revenue had not filed any appeal before the Tribunal against the Commissioner's order dated 22/12/2000 dropping the duty demand of ₹ 28,35,170/-. He, therefore, pleaded that the duty demand of ₹ 28,35,170/- has to be set aside simply on the ground that this duty demand was not the subject matter of appeal before the Tribunal and in de-novo proceedings, .....

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lant company in M/s. AIL or of M/s. AIL in the appellant company; that just because the entire production of the appellant company is sold to M/s. AIL or that the appellant company does not charge any security from M/s. AIL, it cannot be concluded that the two are related person; that there is absolutely no evidence on record to show that transactions between the appellant company and M/s. AIL were not of principal on principal basis or that the appellant company had all pervasive financial and .....

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y the department to establish mutuality of interest between the appellant company and M/s. AIL and since the two cannot be treated as related persons, the duty demand of ₹ 35,63,928/- confirmed against the appellant company and also penalty on the appellant company and other noticee is not sustainable. Shri Santhanam cited the following judgments of the Supreme Court and Tribunal in support of his plea that M/s. Onida Saka Limited and M/s. Adonis (India) Limited are not related persons: (1 .....

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Garg Vs. CCE reported in 2013 (294) ELT 353 (Del.) (8). Shalimar Rubber Industries Vs. CCE reported in 2002 (146) ELT 248 (SC) (9). Uniworth Textiles Ltd. Vs. CCE reported in 2013 (288) ELT 161 (SC) 3.1. Shri Santhanam also pleaded that in any case, the duty demand raised by the show cause notice dated 4/6/1999 for the period from June, 1994 to August, 1996 is time barred, as the conditions required for invoking extended period under proviso to section 11A(1) existence of fraud, wilful mis-state .....

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herein in respect of transactions between a group Company-Ondia Savak Limited and M/s. AIL, the department's stand was that the two are to be treated as a related person and the price charged by M/s. AIL would be the assessable value of the goods manufactured by M/s. Onida Savak Limited and in this case, the appellant's counsel did not contest, the department's allegation that M/s. Onida Savak Limited and M/s. AIL are related persons and only contested the question of trade discounts .....

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1994, i.e., before 1/3/1994 when the rate of duty was specific, the appellant company-M/s. Onida Saka Ltd. were selling the colour T.V. sets manufactured by them directly to their dealers through their depots. It is only when the rate of duty became ad-valorem w.e.f. 1/3/1994 that the marketing company, M/s. AIL came into picture. This shows that M/s. AIL has been floated to depress the assessable value. (2) The statement of Shri Viajy Joshi, Vice-president of the Onida Group and other employees .....

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re charging security amount from their dealers but no security was being taken from M/s. AIL. (4) Once, the marketing functions were taken over by M/s. AIL, it is M/s. AIL who were incurring the expenses on marketing and advertisement of the goods manufactured by the appellant company and it is M/s. AIL who took on rent, the premises earlier rented by the appellant company for using the same as sales depots. However, the premises taken on rent by M/s. AIL were also being used by the employees of .....

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ave suppressed the facts from the department and hence, longer limitation period of five years under proviso to section 11A(1) has been correctly invoked. 5. Shri R. Santhanam in rejoinder with regard to the Tribunal's judgment in the case of M/s. Adonis (India) limited Vs. CCE-Meerut reported in 2000 (119) ELT 68 , pleaded that this judgment is not authority for holding that M/s. Onida Savak Limited and M/s. AIL were related persons, as this allegation had not been contested by the appellan .....

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any - M/s. Ondia Saka Limited and M/s. AIL are related persons within the meaning of this term as defined under section 4 (4) (c) of Central Excise Act, 1994 and accordingly, assessable value of the goods manufactured and cleared by the appellant company would be the price at which the same were sold by M/s. AIL. The second allegation is that certain trade discounts extended by M/s. AIL to its dealers are not admissible for deduction. Initially in the first round of litigation, when this matter .....

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nce of this order of the Commissioner, the appellant had filed a refund claim for an amount of ₹ 28,35,170/- before the Assistant Commissioner as this amount had already been paid by them. While the Assistant Commissioner rejected the refund claim, on appeal being filed to Commissioner (appeals), the Commissioner (appeals) set aside the Assistant Commissioner's order and ordered the refund. On appeal being filed by the Revenue against the Commissioner (appeals)'s order dated 18/12/ .....

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al's order dated 16/12/2004, the matter of refund of ₹ 28,35,170/- is still pending before the Assistant Commissioner. The appellant company along with other noticee - M/s. M/s. Adonis (India) Limited, Shri Ashok Chawla, and Shri Lokesh Khanna had filed an appeal before the Tribunal against the Commissioner's order dated 22/12/2000 confirmed the duty demand of ₹ 35,63,928/- along with interest and imposing penalty on the appellant company as well as other notice. In respect o .....

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d of ₹ 28,35,170/- had not been challenged by the department and as such was not the subject matter of the appeals filed before the Tribunal which were decided by the Tribunal vide order dated 4/5/2001. In view of this, the Commissioner's order confirming the duty demand of ₹ 28,35,170/- is not only totally incorrect order but also a perverse order and, therefore this part of the order has to be set aside. 8. Coming to the question of duty demand of ₹ 35,63,928/- against th .....

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y of interest in the business of each other. 9. In this regard, Revenue relies upon the following evidences: (1) M/s. Adonis (India) Limited had been floated only w.e.f. 1/3/1994 when the rate of duty at Colour T.V. sets became ad- valorem and from this it has been inferred that this company was floated only to depress the assessable value of the goods manufactured by the appellant company. (2) Entire production of M/s. Ondia Saka Limited (Appellant company) was being sold to M/s. AIL who were s .....

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rent was being paid by M/s. AIL was also raised by the employees of the appellant company as their branch office butno rent, telephone, electricity charges were being paid. 10. In our view, just because the entire production of goods of the appellant company was being sold to M/s. AIL who were selling the same at a higher price or that M/s. AIL were incurring the expenses or marketing and advertisement of the goods produced by the appellant company, the two cannot be treated as related persons i .....

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were interest free loans or at interest much lower than the market rates. 11. The appellant company and M/s. AIL can be treated as related persons if there is an evidence to prove that the appellant company had all pervasive financial year and managerial control over M/s. AIL and M/s. AIL were just an extension of the appellant company. But in this regard, we do not find any such evidence. A manufacturer manufacturing certain goods can always decide to sell his entire production to another pers .....

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